»Profit Hunter by Equitymaster

On This Day - 15 SEPTEMBER 2021
To Make 100x Profits You Must Know This...

Editor's Note: Dear reader, Tanushree is unable to write to you today. So we're sharing with you this excellent piece she wrote a few weeks ago on finding 100-baggers. These are stocks that go up 100 times. Here's what you must know about multiplying your money 100 times in the stock market...

  • To make money in stocks you must have the vision to see them, the courage to buy them and the patience to hold them. - Thomas Phelps

Phelps' quote is grossly incomplete without its second part. I will tell you why in a bit.

You know Gillette as the maker of shaving razor blades, which is now owned by Proctor and Gamble (P&G).

Gillette took nearly 32 years to become a 100-bagger (9,900% returns). Even then, at 15% per annum, its compounded annual return over three decades is impressive.

But Thomas Phelps, the author of 100 to 1 in the Stock Market, chronicled an interesting back story of the stock that eventually became one of Warren Buffett's favourites.

From its early days, Gillette was always expanding into new markets and creating new products. The company made effective use of technology for developing and marketing its products.

Throughout its history Gillette's management showed an understanding of technology. That gave it an edge over competitors.

Gillette was an early adopter of television advertising. In 1944, when television was largely ignored by brands, Gillette used the medium to enhance its visibility.


Gillette didn't just spend money on advertising, but also tracked sales using data. This helped Gillette zero in on its key buyers even in those early years.

Well before customers looked forward to Apple's new launches, Gillette's innovations were eagerly awaited.

Gillette's R&D department continuously worked on improvements for its blades. The company invested in R&D even when there was no sign of a competitor with a product that could hurt its market share.

This was partly because it found loyal customers who would pay more for a blade that was slightly better than the one they currently used.

This relentless focus on R&D proved a tough moat for competitors to cross.

Gillette also patented every technology it invented or used before commercialising a product.

In 1962, competitor Tiny Wilkinson Sword introduced a set of coated stainless steel shaving blades with a lot of success.

Users claimed they could get at least a dozen smooth shaves from this product while they got only 3 or 4 from Gillette's carbon steel blades. Wilkinson's blade could have seriously impacted Gillette's dominant position.


However, Gillette's researchers had actually patented the stainless-steel coating process before Wilkinson could obtain a patent.

So, Gillette received a royalty for each stainless blade sold by Wilkinson. This crippled Wilkinson. Gillette eventually launched its own stainless-steel blades.

It's for good reason that from 1940s to 1970s, Gillette's high market share and huge profitability stayed intact.

The US' benchmark S&P 500 index went up 8 times in these three decades. But Gillette's gains of 100 times during this period were driven by the company's own ingenuity. Investors who held on to the stock patiently enjoyed the hugely compounded gains.

By the 1980s though, Gillette had to start taking price cuts to compete. In other words, it took more and more sales, and more and more assets, to generate a given dollar of profits.

Its return on equity also started dropping. This eventually impacted the stock's valuations. Investors who were patient in assessing the 'fatigue risk' to the stock were able to get a timely exit.

So, when it comes to companies that have extraordinary potential you cannot stop at just spotting the opportunity. Even having the courage to buy the stock is only half the job done.

More than a century after Gillette's technology-led aspirations, we find companies riding massive megatrends with the help of new technologies.

Finding out which ones will continue to do this for decades requires patience. Reviewing the impact of such attempts on growth and profitability also requires patience.

Here is Phelps's complete quote. Most investors make a huge mistake by ignoring the second part.

  • To make money in stocks, you must have vision to see, courage to buy and patience to hold. Patience is the rarest of the three.

Warm regards,

Tanushree Banerjee
Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.

Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement

Disclosure & Disclaimer: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. The Author does not hold any shares in the company/ies discussed in this document. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services.

This document is confidential and is supplied to you for information purposes only. It should not (directly or indirectly) be reproduced, further distributed to any person or published, in whole or in part, for any purpose whatsoever, without the consent of Equitymaster.

This document is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity, who is a citizen or resident or located in any locality, state, country or other jurisdiction, where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject Equitymaster or its affiliates to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, Canada or the European Union countries, the same may be ignored.

This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Our research recommendations are general in nature and available electronically to all kind of subscribers irrespective of subscribers' investment objectives and financial situation/risk profile. Before acting on any recommendation in this document, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the securities referred to in this material and the income from them may go down as well as up, and subscribers may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Information herein is believed to be reliable but Equitymaster and its affiliates do not warrant its completeness or accuracy. The views/opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. This document should not be construed as an offer to sell or solicitation of an offer to buy any security or asset in any jurisdiction. Equitymaster and its affiliates, its directors, analyst and employees will not be responsible for any loss or liability incurred to any person as a consequence of his or any other person on his behalf taking any decisions based on this document.

As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407